Comet Enterprise Ltd. v. Air-A-Plane Corp., AIR-A-PLANE

• Citation: 128 F.3d 855
• Decision Date: 10 November 1997
• Docket Number: AIR-A-PLANE,No. 96-1606,96-1606
• Parties: COMET ENTERPRISES LTD.; Comet Enterprise Ltd., Plaintiffs-Appellants, v.CORPORATION, Defendant-Appellee. United States of America, Amicus Curiae.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 855

128 F.3d 855

COMET ENTERPRISES LTD.; Comet Enterprise Ltd., Plaintiffs-Appellants, v. AIR-A-PLANE CORPORATION, Defendant-Appellee United States of America, Amicus Curiae.

No. 96-1606.

United States Court of Appeals Fourth Circuit.

Argued Sept. 29, 1997.

Decided Nov. 10, 1997.

ARGUED: Philip Norton Davey, Davey Associates, P.C., Norfolk, VA, for Appellants. Sushma Soni, Appellate Staff, Civil Division, United States Department of Justice, Washington, DC, for Amicus Curiae. Robert Eugene Brown, Howell, Daugherty & Brown, Norfolk, VA, for Appellee. ON BRIEF: Ruth E. Hansell, Davey Associates, P.C., Norfolk, VA, for Appellants. Frank W. Hunger, Assistant Attorney General, Helen F. Fahey, United States Attorney, Douglas N. Letter, Appellate Staff, Civil Division, United States Department of Justice, Washington, DC; William B. Hoffman, Chief Counsel, Barbara C. Hammerle, Senior Counsel (Litigation), Office of the Chief Counsel, Office of Foreign Assets Control, Department of the Treasury, Washington, DC, for Amicus Curiae.

Before RUSSELL, NIEMEYER and MOTZ, Circuit Judges.

Reversed and remanded by published opinion. Judge MOTZ wrote the opinion, in which Judge RUSSELL and Judge NIEMEYER joined.

OPINION

DIANA GRIBBON MOTZ, Circuit Judge:

Two related companies--one incorporated in Great Britain, the other in Iran--brought this action to obtain commissions on sales a Virginia corporation had made to an entity controlled by the Government of Iran. The district court dismissed the action. The court found it lacked subject matter jurisdiction over the Iranian plaintiff because its counsel had failed to procure a license necessary to represent Iranian entities. Alternatively, on the basis of an Executive Order that prohibits certain transactions between entities organized under the laws of the United States and those controlled by the Government of Iran, the court concluded that both plaintiffs had failed to state a claim upon which relief could be granted. Because we conclude that the licensing requirement does not divest the district court of jurisdiction and the Executive Order does not necessarily preclude the claims filed in the complaint, we reverse and remand for further proceedings.

I.

The factual assertions that follow are based on the allegations in the complaint. On July 19, 1991, Air-A-Plane Corporation and Comet Enterprises Ltd. ("Comet UK") entered into a contract, in which Air-A-Plane made Comet UK its exclusive sales representative for aircraft equipment (including air conditioners) and spare parts in the Islamic Republic of Iran. The contract obligated Air-A-Plane to pay sales commissions to Comet UK on the sale of Air-A-Plane's equipment ordered by customers within Iran.

Pursuant to this contract, Comet UK negotiated, on Air-A-Plane's behalf, with the airline of the Islamic Republic of Iran ("Iran Air") to purchase a substantial amount of Air-A-Plane equipment. In December 1992 and January 1993, Iran Air paid Air-A-Plane almost $1.5 million for this equipment. Commissions on these sales of more than $200,000 became due to Comet UK in February 1993. Air-A-Plane failed to pay Comet UK any of these commissions. On April 11, 1995, Comet UK and Comet Enterprise Ltd. ("Comet Iran"), an Iranian corporation under common management and control, executed a deed of compromise under which Comet Iran became the beneficiary of any future payments from any Comet UK principal, including Air-A-Plane. (Hereafter, the two related companies are collectively denominated "Comet.").

In 1995, Comet obtained additional orders from Iran Air for Air-A-Plane air conditioning units and separate parts. By June 1995, Iran Air had paid to Air-A-Plane more than $500,000 for this equipment; Comet's commissions of more than $82,500 became due in July 1995. Air-A-Plane again failed to pay Comet any of the commissions due on these subsequent sales.

On May 6, 1995, pursuant to the International Emergency Economic Powers Act, 50 U.S.C. § 1701 et seq. (1977), President Clinton issued Executive Order No. 12959 prohibiting certain transactions with the Government of Iran. The Executive Order states in pertinent part:

Section 1. The following are prohibited, except to the extent provided in regulations, orders, directives, or licenses that may be issued pursuant to this order, and notwithstanding any contract entered into or any license or permit granted prior to the effective date of this order:

....

(d) ... any transaction, including the purchase, sale, transportation, swap, financing, or brokering transactions, by a United States person, relating to goods or services of Iranian origin or owned or controlled by the Government of Iran ...

....

Section 8(a). This order is effective at 12:01 a.m., eastern daylight time, on May 7, 1995, except that ... (ii) letters of credit and other financing agreements with respect to existing trade contracts may be performed pursuant to their terms with respect to underlying trade transactions occurring prior to 12:01 a.m., eastern daylight time, on June 6, 1995.

Exec. Order No. 12959 (1995). The Office of Foreign Assets Control ("OFAC") promulgated implementing regulations that define Government of Iran to include any "entity controlled by" it. 31 C.F.R. § 560.304(a) and (b) (1996). The regulations also require legal counsel to procure a license in order to represent "a person in Iran," including Iranian corporations, in certain transactions. Id. § 560.525(b) and § 560.305.

Seeking to collect the commissions, Comet UK and Comet Iran filed this action in federal court against Air-A-Plane on September 14, 1995. Air-A-Plane moved to dismiss the action pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. Air-A-Plane contended that the court did not have jurisdiction over Comet Iran because Comet Iran's counsel had not obtained a license to provide legal services to an Iranian entity as required by 31 C.F.R. § 560.525(b). Additionally, Air-A-Plane asserted that Executive Order 12959 barred performance of its contract with Comet and so the complaint failed to state a claim.

The district court granted both motions. Initially, the court held that because the regulations promulgated pursuant to the Executive Order required counsel to obtain a license in order to provide certain legal services to an Iranian corporation, and because counsel for Comet Iran, an Iranian corporation, lacked such a license, the court did not have jurisdiction over Comet Iran's claim. The court then determined that even if it had jurisdiction over Comet Iran, it would "dismiss the action in its entirety" because "obtaining orders from Iran Air constitutes ... a transaction relating to goods owned or controlled by the Government of Iran" and payment for such transactions "is barred by the [Executive] Order."

We review de novo dismissals for lack of subject matter jurisdiction or for failure to state a claim upon which relief can be granted. See Cavallo v. Star Enter., 100 F.3d 1150, 1153 (4th Cir.1996); Tillman v. Resolution Trust Corp., 37 F.3d 1032, 1034 (4th Cir.1994).

II.

Comet challenges the district court's finding that it lacked subject matter jurisdiction on several grounds.

Noting that the relevant regulations were amended in August 1997, Comet asserts that the 1997 amendments to 31 C.F.R. § 560.525, which relax the licensing requirement for the provision of legal services to a "person in Iran," apply here. Thus, Comet, and the United States as amicus curiae, argue that under the current regulations, as amended August 4, 1997, the provision of legal services to Comet Iran in connection with this litigation would be permitted.

Comet is correct that, after the district court's ruling, OFAC amended 31 C.F.R. § 560.525(a)(3) and § 560.525(a)(5)(I) to authorize the provision of legal services "to the Government of Iran or to a person in Iran" for the "[i]nitiation and conduct of domestic United States legal, arbitration, or administrative proceedings on behalf of the Government of Iran or a person in Iran ... [t]o resolve disputes between the Government of Iran or an Iranian national and the United States or a United States national." 62 Fed.Reg. 41851, 41852 (Aug. 4, 1997). Accordingly, the amended regulations would permit the legal representation of Comet Iran in this suit, without the issuance of any license.

The recent amendments, however, do not apply to this case. The regulations expressly specify that amendments do not apply to a "suit or proceeding commenced or pending prior to such amendment." 31 C.F.R. § 560.402 (1996). Thus, we must determine whether the licensing requirement contained in the regulations, applicable at the time Comet Iran filed this suit, deprives this court of jurisdiction.

The district court concluded that the licensing requirement for the provision of legal services was jurisdictional. For this reason, the court held that the failure of Comet Iran's counsel to obtain a license to provide legal services deprived the court of subject matter jurisdiction over Comet Iran. On appeal, Comet, and the United States as amicus curiae, challenge the district court's determination that the licensing requirement is jurisdictional. Alternatively, Comet asserts that if the requirement is jurisdictional it is unconstitutional.

Neither the district court nor Air-A-Plane cite any administrative or judicial precedent to support the conclusion that the licensing requirement is jurisdictional. In fact, although the specific licensing requirement at issue here has never before been interpreted, federal courts have been reluctant to find similar requirements jurisdictional.

For example, when Cuban nationals brought an in personam action against United States nationals for fraud, the Eleventh Circuit held that the relevant OFAC regulation, which imposed a licensing requirement for any person engaged in a "transaction" with Cuba, was not jurisdictional. Dean Witter...